Cyclescheme ownership fee

dstev55

Morning all

I'm a year down the line of getting a bike on a Cycle to work scheme - Cyclescheme to be precise. I've just had an email off them saying I need to decide what to do and my only options are pay £70, pay £250 or give the bike back! The £70 fee is an "Ownership Fee" that is a deposit that allows me to keep the bike until it becomes mine in 4 years time. The £250 fee is so it becomes my bike now.

I had a bike a few years ago on what must have been a different scheme as I didn't had to pay anything at the end, I just told them I wanted to keep it and they rented it out to me for free for a few more years until it became mine.

I'm a bit frustrated at having to fork out £70 now to be honest. I know £70 isn't a huge amount of money and I have saved more than this on the bike but to come a month before Xmas isn't ideal. It was probably somewhere in the T+C's when I first bought the bike but obviously wasn't that clear otherwise I'd have seen it. Also not sure why one scheme feels the need to charge it and another one doesn't.

Anyone else been unexpectedly stung by this fee?

timothyw

I wouldn't say stung, I expected it.

Was the previous bike also on cycle scheme (the specific provider, rather than the more generic term)?

Comfort yourself that it's still cheaper than it would have been on regular credit, but yeah, not sure I would bother again for a sum over £500 (fee is cheaper below that amount and you can use cyclescheme just for parts nowadays).

Worst part is when you realise that it's the well paid who benefit most from the scheme ;-)

ugo.santalucia

I did opened a similar thread where end of term options are discussed.

That said, I find the scheme exceedingly complicated for Joe average who doesn't do accountancy for a living. Working out how much I really save is an act of faith and if I was to buy the bike back at the end of the 12 months, then I'd save basically nothing.
I am still unclear who is the real winner... if my employer pays 1000 pounds to cyclescheme, I repay the full amount from my gross salary and then I was to repay another 250 after 12 months, it seems to me the winner is my employer and not me . They get 25% return out of lending money for one year, which is a lot more than any high street lender would get

akh

My employer uses the same scheme and I'm sure it was explained somewhere in the advertising material, although not in a particularly prominent place.

I believe they're obliged to charge you something, it's to do tax. HMRC changed their guidance in the last couple of year which is why the amount may well be greater than the last time. There's a recent thread on this very topic if you scroll down a bit.

As a basic rate tax payer I've decided the scheme isn't worth it for me. Too much hassle for the small amount saved. If I was a higher rate tax payer, then maybe.

ugo.santalucia

AKH wrote:

As a basic rate tax payer I've decided the scheme isn't worth it for me. Too much hassle for the small amount saved. If I was a higher rate tax payer, then maybe.

A scheme that rewards the wealthier is inherently flawed... they should have made it so that you save VAT, which is a flat tax, equal for all

dstev55

And the worst thing is that if you get paid the minimum wage you can't use it at all!

My previous scheme (might have been Cycle 2 Work - it was whoever Decathlon use) and I definitely did not have to pay anything after 1 year so they aren't obliged to charge a fee unless it has changed since then.

akh

ugo.santalucia wrote:

AKH wrote:

As a basic rate tax payer I've decided the scheme isn't worth it for me. Too much hassle for the small amount saved. If I was a higher rate tax payer, then maybe.

A scheme that rewards the wealthier is inherently flawed... they should have made it so that you save VAT, which is a flat tax, equal for all

Yeah, it's an inversion of the way it should be.

akh

dstev55 wrote:

And the worst thing is that if you get paid the minimum wage you can't use it at all!

My previous scheme (might have been Cycle 2 Work - it was whoever Decathlon use) and I definitely did not have to pay anything after 1 year so they aren't obliged to charge a fee unless it has changed since then.

This is from their website:

What happens at the end of the Hire Period?
At the end of your hire period you must choose an ownership option and, if applicable, make another payment to take ownership of your Cyclescheme Package. Without this payment HMRC would class the agreement as hire purchase, rather than hire, and as a the tax exemption would not be available.

If Cyclescheme is handling your ownership options, you will be given the following 3 options at the end of your hire period:

Own it now - Take ownership of your package by paying Cyclescheme the market value (e.g. for a one year old package this would be 18% or 25%* of the Certificate value in accordance with HMRC requirements).
Own it later – Enter into an Extended Use Agreement with Cyclescheme. You pay a small refundable deposit (either 3% or 7% of your certificate value*) and continue to use the equipment for 3 years. No further regular salary payments are required during this time. At the end of this period, Cyclescheme refunds the deposit if you do not wish to keep the package. No further action or payment is required if you wish to keep the equipment.
Return - Return the package to Cyclescheme at your own cost.
Cyclescheme recommends option 2. This allows you to participate in another scheme during this period, as the agreement is directly between yourself and Cyclescheme - your employer does nothing more.

* The lower figure is for a certificate value of less than £500 and the higher one for a certificate value of £500 or more. These figures include VAT.

dstev55

AKH wrote:

dstev55 wrote:

And the worst thing is that if you get paid the minimum wage you can't use it at all!

My previous scheme (might have been Cycle 2 Work - it was whoever Decathlon use) and I definitely did not have to pay anything after 1 year so they aren't obliged to charge a fee unless it has changed since then.

This is from their website:

What happens at the end of the Hire Period?
At the end of your hire period you must choose an ownership option and, if applicable, make another payment to take ownership of your Cyclescheme Package. Without this payment HMRC would class the agreement as hire purchase, rather than hire, and as a the tax exemption would not be available.

If Cyclescheme is handling your ownership options, you will be given the following 3 options at the end of your hire period:

Own it now - Take ownership of your package by paying Cyclescheme the market value (e.g. for a one year old package this would be 18% or 25%* of the Certificate value in accordance with HMRC requirements).
Own it later – Enter into an Extended Use Agreement with Cyclescheme. You pay a small refundable deposit (either 3% or 7% of your certificate value*) and continue to use the equipment for 3 years. No further regular salary payments are required during this time. At the end of this period, Cyclescheme refunds the deposit if you do not wish to keep the package. No further action or payment is required if you wish to keep the equipment.
Return - Return the package to Cyclescheme at your own cost.
Cyclescheme recommends option 2. This allows you to participate in another scheme during this period, as the agreement is directly between yourself and Cyclescheme - your employer does nothing more.

* The lower figure is for a certificate value of less than £500 and the higher one for a certificate value of £500 or more. These figures include VAT.

I'm not disputing whether or not I was informed - I think the issue is that on my previous scheme I didn't have to pay anything extra so I wasn't expecting to pay anything on this scheme either.

akh

I wasn't trying to prove that point, it was more for information purposes if anyone cares. That's from the FQA on their site and it explains why the payment has to exist.

My understanding is that HMRC (probably accurately) changed their guidance on how much the bike was worth after 12 months. The rule regarding a payment of residual value always applied, but under the old guidance the value was trivial. The old figure was so ridiculously low, something like 1%, it wasn't worth collecting the payment so most schemes didn't bother.

The new figure is a more realistic 25%, but as that can be as much as £250, it's very much worth collecting and so the schemes do.

dstev55

Yeah fair enough. Probably won't bother with the scheme again, quite a faff getting it set up and you don't actually save that much with the additional fee at the end.

ugo.santalucia

dstev55 wrote:

Yeah fair enough. Probably won't bother with the scheme again, quite a faff getting it set up and you don't actually save that much with the additional fee at the end.

My understanding is that you save if you defer the final payment for 4 years... but if you leave your job, you save very little.

timothyw

ugo.santalucia wrote:

dstev55 wrote:

Yeah fair enough. Probably won't bother with the scheme again, quite a faff getting it set up and you don't actually save that much with the additional fee at the end.

My understanding is that you save if you defer the final payment for 4 years... but if you leave your job, you save very little.

That is arguably what you are paying the £70 for at the end of the year of payments.

Ownership transfers from your employer to 'cyclescheme' at the point you make that payment, so it doesn't matter if you change jobs after that time.

Then after the four years, ownership transfers to you (or you can return the bike to cyclescheme and get your £70 back).

But yeah, there's no denying it's a pretty shit scheme in terms of overall savings - they ought just give full tax relief on bicycle hire purchases so that it's yours after the year (and you ought be able to get the VAT back regardless - I understand your employer is able to reclaim the VAT on the purchase?)

Cycling to work is so comprehensively established as a public health good (and a congestion good, etc etc) that anything that encourages people to do it should be embraced with both hands, rather than just this wishy washy taxable benefit crap we have to put up with.

flanners1

ugo.santalucia wrote:

AKH wrote:

As a basic rate tax payer I've decided the scheme isn't worth it for me. Too much hassle for the small amount saved. If I was a higher rate tax payer, then maybe.

A scheme that rewards the wealthier is inherently flawed... they should have made it so that you save VAT, which is a flat tax, equal for all

That will be the UK PAYE tax regime in a nutshell then!

kingrollo

Do aware that there any many different schemes now. Cyclescheme is one - cycle to work is another - and the rules are drastically different.

The scheme I use has a limit of £10k - at the time of purchase you can opt to extend the lease for a further 5 years - at that point (5 years later) the bike becomes yours. There are no further payments after the 1st year.

You can buy from numerous shops - the real downside if you have to deal with cyclesolutions - who IME are extremely error prone - but I had to bear with because I get a £3.5k bike, for just over £2k

trek_dan

When I had a bike off Cyclescheme I just ignored the request for money and it went away.

bompington

kingrollo wrote:

Do aware that there any many different schemes now. Cyclescheme is one - cycle to work is another - and the rules are drastically different.

There is one salary sacrifice scheme: the Cycle to Work scheme set up and recognised by HMRC.

There are many providers, but the agreement is between you and your employer - the providers just act as middlemen. I may be wrong but my understanding is that companies like cyclescheme essentially provide credit to buy the bikes, so any profit goes to them not the employer.

When I worked for a small 3rd sector school I organised the scheme myself - quite easy to do for a small business: just some fairly trivial payroll work. So no fees, end of hire deposits or any of that nonsense ;-)

It's a while since I did one, but the rule used to be that an employer could offer more than £1K as long as they were registered under the Consumer Credit act. A lot of retailers are happy to sell you a bike over a grand and you pay the difference, but that's legally a bit of a grey area.